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Coming benefit? ABLE account

In the last days of the last Congress, a bill passed giving persons who became disabled at a young age, a possible savings tool. In a bipartisan effort, Congress gave states the option to establish state admini

Coming benefit? ABLE account

In the last days of the last Congress, a bill passed giving persons who became disabled at a young age, a possible savings tool. In a bipartisan effort, Congress gave states the option to establish state administered ABLE accounts. ABLE stands for Achieving a Better Life Experience. ABLE accounts will be akin to state-run, section 529 college savings accounts such as Tennessee’s TNStars accounts. The disabled, their parents and/or friends can deposit up to approximately $14,000 total annually. The amount is approximate because it equals the annual federal gift tax limit. The contribution is not tax deductible but earnings grow tax free. Expenditures or withdrawals for qualified expenses are not taxed.

Qualified expenses include but are not limited to housing, transportation, education, health care not covered by insurance, assistive technology, financial management, funeral and burial expenses, legal fees, and personal support. Qualified expenses do not include vacations and recreational video games.

The new option enjoyed uncommon bi-partisan support passing the House with over 400 votes and passing the Senate with over 70 votes. Perhaps to garner that level of support and to pay for the loss of tax revenue the act provides for ABLE accounts only for those disabled before age 26. The disabled who meet the age limit and who are also receiving Supplemental Security Income (SSI) or Social Security Disability would meet the disability definition. In addition, there is an alternate certification program through which a disabled person could prove that he or she had a disabling condition equivalent to that required by the Social Security Administration to prove disability.

There are limits to the amount of money that can be accumulated in ABLE accounts. In order to continue to receive SSI, the ABLE account could not exceed $100,000. However, this is 50 times the present SSI non-exempt resource limit. If the disabled person just needs health care, he or she may be able to accumulate more because that ceiling is tied to the maximum allowable in the college savings program.

The ABLE accounts will not be a good means to transfer funds between generations. Any remainder in the accounts will first go to pay back the states for health care: Medicaid expenses. My clients and many others will not have $14,000 a year to contribute to an ABLE account. Despite that, I am glad that some of the disabled will be able to have reliable transportation, job coaching, education, and home repair through this tool. I am anticipating that all states will take the option.

For more information review the ABLE Act summaries from the U.S. House of Representatives Ways and Means Committee website or the website of Attorney Stephen Dale, www. Achievingindepedence.com, or contact an elder law attorney specialist.

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